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Proposed ITAR Brokering Rules Published This Week

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Tuesday, 20 December 2011 11:14

by Jason Poblete

This week the Department of State published a much anticipated proposed rule to amend Part 129 of the International Traffic in Arms Regulations (ITAR) relating to brokers and brokering activities.

According to the Federal Register notice, "[t]he proposed revisions are intended to clarify registration requirements, the scope of brokering activities, prior approval requirements and exemptions, procedures for obtaining prior approval and guidance, and reporting and record-keeping of such activities." You can download a pdf-version of the proposed regulations by following this link

If you've ever had to deal with this section of the ITAR, you understand that these provisions are not the clearest and are in much need of a fulsome overhaul. I have not had enough time to review all of it. A clear set of definitions, for example, would go a long way in advising companies on how to set up proper procedures or identifying issue areas in existing matters. And based on what I have read, they are planning to make extensive changes to the "broker" and "brokering" definitions.

And just in case your wondering how important brokering rules happen to be under the ITAR regime, and they are, recall that earlier this year the U.S. Government announced that BAE Systems plc had settled a case with the State Department's Directorate of Defense Trade Controls (DDTC) for a tune of $79 million for alleged violations of the ITAR brokering provisions. You can read more about the BAE Consent Agreement by following this link.

Will trade security practitioners have a firmer footing moving forward in 2012 as to what constitutes a broker or brokering activities? We will post a more detailed review of the proposed regulation in the near future, but I think we will. The BAE case set some interesting precedent and, coupled with these proposed regulations, as well as the Obama Administration's ongoing export control reform efforts, we should be better equipped to advise clients on these matters.

In the meantime, please send us your views and comments on the proposed regulation.



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